A major issue in the case was whether the California Independent Wholesale Sales Representative Contractual Relations Act (the “Act”) applied to Prestidge because it was a master rep or wholesaler with many sub-reps.

The Plaintiff, G.H. Prestidge (“Prestidge”), owned and operated a wholesale broker business and served as a Master Broker with a national sales force consisting of 14 rep organizations with approximately 45 individual sales representatives. The reps marketed goods and services to retailers of a variety of companies. Defendant, Oscar Home Care, Inc. (“Oscar”), was a supplier/distributor of air fresheners and related products in the retail industry. Both were headquartered in Ontario, California. The lawsuit arose from an alleged failure of Defendant, Oscar, to pay Plaintiff, Prestidge, commissions and other compensation as agreed to under two written contracts.

Under the first contract, Oscar appointed Prestidge as Oscar’s exclusive sales organization to sell Oscar’s products. Under a second contract (replacing the first) Oscar appointed Prestidge as Oscar’s exclusive sales organization to sell Oscar’s products and also to locate and manage other sales representatives (sub-reps) to sell Oscar’s products. Prestidge claims that Oscar breached the first contract by failing to pay Prestidge an agreed management fee of $3,500 per month and also breached the second contract by failing to pay Prestidge a management fee of 5% of all orders received from sub-brokers appointed under the second contract, plus 1% of net sales if annual sales exceeded $1M and 2% of net sales if annual sales exceeded $2M. Prestidge contends the commissions due from Oscar were in excess of $3,300,000 because the second contract was never canceled.

A major issue in the case was whether the California Independent Wholesale Sales Representative Contractual Relations Act (the “Act”) applied to Prestidge because it was a master rep or wholesaler with many sub-reps. Prestidge argued that it qualified as a wholesale sales representative as defined under the Act even though it used other independent sales representatives to place orders, and thus met its burden of proof that it was entitled under Section 1738.12(e) of the Act to commissions and was thus entitled to recover triple damages and attorneys’ fees.

Section 1738.12(e) of the Act states:

“(e) Wholesale sales representative means any person who contracts with a manufacturer, jobber, or distributor for the purpose of soliciting wholesale orders, [and] is compensated in whole or part by commission…”

Based upon the clear definition of the Act, the court agreed that Prestidge was entitled to recover both triple damages and attorneys’ fees.

The court also noted that Oscar failed to respond to Prestidge’s discovery requests regarding commissions earned, even though Prestidge filed numerous Motions to Compel Discovery and the court repeatedly sanctioned Oscar and its attorney. As a result of the actions of Oscar and its attorney, the trial court granted Prestidge’s Motion to Strike Oscar’s Answer and entered a Default Judgment on the grounds that Oscar and its attorney failed to attend a mandatory settlement conference and comply with the discovery requests. At the Default Judgment prove-up hearing, Prestidge testified regarding the two contract terms and Oscar’s contract breaches.

When determining that Prestidge was entitled to recover triple damages and attorneys’ fees, the court stated:

“Once a default judgment is entered against a Defendant, the Plaintiff needs only to establish a presumption of the right to relief and the amount of damages, which shall not exceed the amount requested in the Plaintiff’s Complaint or Statement of Damages … and shall be ‘for such sum as appears by such evidence to be just.”

Further the court stated that the issue of whether Prestidge was acting as a Wholesale Sales Representative under the California Act is a mixed factual and legal issue. Since the facts are undisputed based upon the determinations proved in the proceedings, the remaining issue is a question of law for the court to decide. The court reviewed the legislative history of the Act and the transcript of the hearings which revealed that the Act provides in relevant part that “A manufacturer, jobber, or distributor, who wilfully fails to pay commissions as provided in the written contract, shall be liable to the Sales Representative in a civil action for triple damages proved at trial.” At the hearing, Prestidge provided evidence establishing that Oscar failed to pay commissions earned in previous years. There was also clear evidence that Oscar was a manufacturer or distributor of products and had contracted with Prestidge to set up a network of Wholesale Sales Representatives to obtain orders from retailers at least partially within this state for the purchase of Oscar’s products.

If Prestidge was acting as a Wholesale Sales Representative as defined in the Act, the Act applies and Prestidge is entitled to recover triple damages and attorneys’ fees. The Court stated that sub-reps who develop territorial market areas should be deemed to be covered by the Act as Independent Sales Representatives.

The Court concluded that under the circumstances, Prestidge qualified as a Wholesale Sales Representative as defined in sub-section (e) of the Act even though Prestidge used other Independent Sales Representatives to place the orders. Prestidge established it was a Master Broker who retained sub-brokers to place orders for Oscar. Construing the Act to encompass Master Wholesale Brokers such as Prestidge is consistent with the intent of the Act of providing protection to those reps and sub-reps who spend many hours developing sales territories for marketing a manufacturer or distributors’ products to retailers.

Here, as a master broker, Prestidge was involved in developing a network of brokers in order to market Defendant’s products, and therefore should be provided protection under the Act from unjust termination of the territorial market areas it developed for Oscar and the failure of Oscar to pay commissions earned. The fact that Prestidge used sub-brokers in furtherance of marketing Oscar’s products should not preclude Prestidge from the protections provided under the Act. Depriving Plaintiff of protection under the Act is contrary to the intent of the Act since Master Brokers, such as Plaintiff, are an integral part of the development of a sales territory used to market products. As a Master Broker, Plaintiff facilitated the sale of Defendant’s products through Sub-Brokers who contacted the retailers and thus was instrumental in developing the sales territories.

Because Plaintiff met its burden of proving that it was a Wholesale Sales Representative within the meaning of Section 1737.12(e) of the Act, the Act applies. The Court thus remanded the matter to the trial court for an order awarding Plaintiff, Prestidge, appropriate treble damages and attorneys’ fees.